- EUR/USD extends the bearish start of the week on Tuesday.
- The German IFO Business Climate will take centre stage in the docket.
- CB Consumer Confidence next of significance in the US calendar.
The selling bias around the single currency remains well and sound on Tuesday and puts EUR/USD under pressure near the 1.1300 neighbourhood.
EUR/USD looks to data, FOMC
EUR/USD sheds ground for the second session in a row on Tuesday amidst the continuation of the recovery in the greenback, which lifted the US Dollar Index (DXY) back to the key 96.00 zone despite the mixed activity in US yields.
In the meantime, investors are expected to remain wary ahead of the upcoming FOMC event on Wednesday, while the geopolitical front – with Russia, Ukraine and the US in the centre of the debate – is seen dictating the mood in the more macro scenario.
In the domestic calendar, the German Business Climate measured by the IFO survey will grab all the attention later on Tuesday ahead of the US Consumer Confidence for the month of January and releases from the US housing sector.
What to look for around EUR
EUR/USD seems to have met a tough barrier in the area below 1.1500 in mid-January, sparking a corrective downside soon afterwards in tandem with the strong recovery in the greenback. Moving forward, there is not much optimism around the pair, particularly in light of the Fed’s imminent start of the tightening cycle vs. the accommodative-for-longer stance in the ECB, despite the high inflation in the euro area is not giving any things of cooling down for the time being. On another front, the unabated advance of the coronavirus pandemic remains as the exclusive factor to look at when it comes to economic growth prospects and investors’ morale in the region.
Key events in the euro area this week: Germany IFO Business Climate (Tuesday) – Germany GfK Consumer Confidence (Thursday) – Germany Advanced Q4 GDP, EMU Final Consumer Confidence.
Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path. Italy elects President of the Republic in late January. Presidential elections in France in April.
EUR/USD levels to watch
So far, spot is losing 0.14% at 1.1308 and faces the next up barrier at 1.1369 (high Jan.20) seconded by 1.1469 (100-day SMA) and finally 1.1482 (2022 high Jan.14). On the other hand, a break below 1.1290 (weekly low Jan.24) would target 1.1272 (2022 low Jan.4) en route to 1.1221 (monthly low Dec.15 2021).
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